U.S. Business: Vanishing Prospect

The Administration had been promising for months that this year would at last bring an end to the nation's chronic balance-of-payments deficit. Last week that prospect virtually vanished—a victim of the rising cost of the Viet Nam war and, strange as it seems, surging prosperity at home.

Treasury Secretary Fowler still insisted that "equilibrium"—an equal balance, give or take $250 million, between surplus and deficit—"remains our goal for 1966, and we mean to reach it." However, he hedged his confident earlier forecasts that the target would actually be met, calling both the price of the war and the nation's normally large trade surplus "imponderables" that could upset the calculations. Commerce Secretary John Connor sounded even gloomier. "The balance-of-payments problem is going to be with us in one form or another as far as the trained eye can see into the future," he said.

Paradoxically, the U.S. payments deficit in 1965 fell to $1.3 billion, less than half the drain of the year before and the lowest level since 1957. The biggest reason: a $2.25 billion drop in bank loans to foreigners. Offsetting that gain, however, imports rose faster than exports, partly because of dock strikes and partly in response to the demand for goods from free-spending consumers and businessmen. Result: the U.S. trade surplus—the excess of exports over imports—shrank from $6.7 billion in 1964 to $4.8 billion last year. The trend, said Connor, remains a "very serious" problem. On top of that, Viet Nam escalation may pull $700 million of gold and dollars out of the U.S. this year as against $250 million in 1965.

All these pressures prompted both Fowler and Connor to hint that the Government may impose stronger curbs on private spending abroad—without indicating what they would be. In any case, the Administration is still leaning away from such emergency brakes as severe credit tightening or mandatory controls on foreign investment, is keeping mum on whether it may restrain U.S. tourist spending.